- October 2, 2012
- 4:46 pm
- Andrew Keyt
- no comments
Mind Your Own Business! Part 1: Managing Privacy within a Family Business
We recently wrapped our September conference, Playing it Safe: Protecting the Family Business in a Public World, and ever since I’ve been keenly aware of my own privacy. Shredding documents, swiping a credit card, even signing my name—so many of the day to day things I took for granted now feel more… vulnerable. Am I doing everything I can to protect my own privacy? My own identity? Family businesses are notorious for being intensely private. But they are also known for playing an important role in their communities. Through philanthropy, corporate responsibility and other contributions to the local economy, a family business can serve as the backbone of their town. Within largely populated cities, families have an easier time maintaining anonymity but in smaller towns, managing a public profile and family privacy becomes more challenging.
Year after year, especially at times when business scandals and sagging corporate performances dominate the headlines, many look to family-business leaders as a reminder of what true corporate citizenship looks like. The wall of privacy vanishes. Because the business is inextricably connected to the community, individual family members (especially when the family business carries the family name) are suddenly thrust into the public eye and held to a higher standard. This creates a burden for family-business leaders. A balancing act begins to play out. On one hand, the business must continue to chug along and be responsibly managed. On the other hand, the family must guard their privacy regarding personal matters (i.e., wealth management).
George Peterson’s family started a metal fasteners business, in 1949 in a small Iowa town, population 2,300. As a second-generation member, George grew the family operation to a $250 million-a-year business. Peterson Manufacturing is now the town’s economic cornerstone and number one employer. While this dominance affords Peterson Manufacturing a number of business advantages (increased political leverage, lower operating costs and plenty of room for expansion), the circumstances have also posed a number of challenges for the Peterson family including dealing with jealousy, criticism and scrutiny about how they spend their money.
George and his siblings, Tim and Alyssa, all grew up within the shadow of the business. George and Tim, each with more than 30 years of service at Peterson Manufacturing, have come to represent the firm’s values and vision in the community. Alyssa, who worked in the business years ago, plays an important community role running the family foundation.
George, Tim and Alyssa are united in their desire to keep the business in the family, but preparing the third generation to eventually assume leadership positions has not been easy. Because of the family’s high profile and affluent wealth, the Peterson children have faced increased scrutiny in school, on the playground and in other settings.
All children struggle to assert their own identities, particularly in small towns, but this becomes magnified when raised by dominating parents. As much as George and his siblings hope to pass the Peterson Manufacturing reins to their children, they also want to support their children’s happiness and individual growth.
Challenges like the Petersons’ are common for family businesses, especially those that play a large economic, political and social role in a small community. Managing the family’s privacy while attending to the firm’s future requires the family to address three major areas:
- Supporting family unity by managing the family’s profile
- Preparing the next generation
- Managing business information
One day, a staffer in the mayor’s office approached Alyssa to express her excitement about the new expansion project for Peterson Manufacturing’s facility. Unaware that the company had finalized the decision, Alyssa felt embarrassed to learn the news from an outsider.
An event like this illustrates the importance of ensuring that all family members are kept informed of important business activities, both for the well-being of the business and the family. While business leaders are responsible to maintain family unity by sharing relevant information in a timely fashion, family members also must be given clear guidance on what type of information is appropriate to share outside the family.
How does a family business create a unified front regarding family-business information? A savvy family-business leader will create a strong board of directors. They will also appoint a reliable group of family members to lead family meetings about such matters and to establish policies governing the release of information.
Families like the Petersons face complex challenges in managing their public profile. How do we display our wealth? What are the best ways to interact with those around us? How do we contribute to charitable causes? How does our behavior reflect on us as a family? If a family member builds a huge home, or the family builds a community center that carries the family name, what kind of image does this create? How do these choices affect the community’s scrutiny of the business and individual family members?
Developing a strong family governance system is the first step toward addressing these questions. A good governance system articulates the family’s values, mission and vision (both for the business and the family). When family members clearly understand these values—and how their actions reflect directly affect the family business—they can be better representatives for the family and the business.
Check back on Thursday for Part II, where I’ll talk about Preparing the Next Generation. Until then, let us know what steps your family has taken to protect itself and manage its family and business profiles.